1. Compensation: Creating an Equitable and Market-driven Pay System
YWCA –USA National Capacity
Building Institute
February 2014
Alice Conner, M.S., SPHR
HR Consultant

2. Today’s Objectives Compensation Philosophy Legal Considerations
Sources of market data
Setting a fair and equitable pay structure
Job evaluation methods
Strategies for market adjustments and other pay increases
Benefits as part of total compensation

4. What People Earn

5. Compensation Strategy and Philosophy
Value of pay
Market competitiveness
Benefits’ Package
Pay as a motivator

6. Compensation Philosophy and Strategy
Market Adjustments
Skill Differentials
Internal Promotions
Capping Pay at the Max
Acting/
Interim Roles
Supervisory Authority
Demotions
Geographic Differentials
Academic Degrees

7. Legal Considerations Exempt classifications
Overtime pay for non-exempt
Independent Contractor vs. Employee
IRS sanctions for excessive executive pay
Compliance with collective bargaining agreement

8. Job Descriptions: The Basis for Determining Fair and Market-driven Pay
Job descriptions should include:
Essential functions
Core competencies
Education
Experience level
Supervisory responsibility
Level of independent judgment

9. Job Descriptions’ Link to Pay
Compensable factors include:
Scope of responsibility
Knowledge (education and experience)
Problem-solving
Financial management responsibility
Internal and external relationships
For “hybrid” jobs, estimate % of time spent in each functional area (i.e.—Facilities and Executive Assistant)

10. Market Analysis Techniques
Use third party survey data, not individual employers
Mean vs. median
Use job summaries, not just job titles
Match 80% of essential functions
“Age” the data to a common date
Determine local, regional or national data for each job

11. Reasons for Job Evaluation
Objective analysis of the job’s worth to the organization
Ensures internal equity
Assists in determining pay grades
Rational basis for negotiating pay rates in collective bargaining
Identifies a ladder of progression for employees
Complies with Equal Pay Act and Fair Pay Act (2009)
Develops a base for merit or pay for performance increases

12. Comparing Unlike Jobs Compensable Factor Child Care Provider
Director of Advocacy
Scope of responsibility
Clearly defined procedures
Faces critical, complex challenges
Problem Solving
Solves routine, recurring problems
Knowledge
H.S. diploma
B.A./B.S. plus 4 years management experience
Fiscal Responsibility
Conserves costs, attentive to revenue
Develops and administers dept. budget
Relationships
External clients
Board, donors, elected officials

13. Method A: Establishing a range
Use the market median as the mid-point of the pay range for each position
Build a 30% spread on either side of the median for non-exempt; 40% for exempt, 50-60% for senior management
Example of an exempt pay range:
34, , ,000
Minimum-----Mid-point---Maximum

14. Method B: Establishing a Range
Establish a range for the most entry level non-exempt position and then build each subsequent ranges using a 10-12% differential between ranges.
Example: Min. Mid Max
N-1 Receptionist
N-2 Child Care Asst
N-3 Admin. Asst
N-4 Payroll Clerk

15. Placement in the range
Calculate “compa-ratio” (each position compared to the mid-point)
Use clear criteria to determine appropriate placement in new range
Length of service
Performance documentation
Performance rating by supervisor
Current placement in range
Combination
Recommend capping salaries at maximum of range

16. Salary Increase Methods
General
Cost of Living
Market adjustment within range
Merit or performance based
Skill-based differentials
Productivity based
Lump sum bonus

17. 2014 Compensation Forecast: Partially Cloudy with an 90% Chance of Raises
Retention is a primary concern of most employers
3.1% budgeted for pay increases
2.1% projected for salary structure increases
Sources: World at Work Salary Budget Survey
2013 PayScale Compensation Best Practices

18. Benefits as a recruitment/retention tool
Benefits typically cost 30% of payroll
Recommend annual benefits statements
401k or 403b plan designs
Paid time off plans
Cost analysis of benefits

19. Salary and wage data sources
ERI (
Bureau of Labor Statistics (
Business and Legal Reports (
Medical Group Management Association (
Kenexa CompAnalyst
Local surveys produced by universities, United Way, non-profit associations, human resource associations, professional associations
Towers Watson data available at World at Work (WAW) library, Scottsdale, AZ
Mercer… Data available at WAW library

20. Resources and References
External compensation consultants
World at Work coursework
Society of Human Resource Management (SHRM)
(FLSA exempt classifications)
Solving the Compensation Puzzle by Sharon Koss

21. Questions? Comments! Suggestions
Thank you, YWCA!